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Archive for January 20th, 2013

The New Year resolution on here was to refrain from taking the mickey out of Independent News and Media, the publishers of the Independent and the Sunday Independent. The group is in severe trouble with debt, and what might be euphemistically described as “challenging” market conditions. The group is not alone facing challenges – the Communicorp radio group, RTE, TV3, TCH which publishes the Sunday Business Post and Irish Examiner, and even the venerable Irish Times are all facing severe challenges. But IN&M is particularly suffering with €400m of bank loans imminently due, with a share price that is down 85% from when Gavin O’Reilly was deposed last year, revenues falling and the group is presently valued at a marginal €20m, down from over €1bn at the peak in 2007.

IN&M’s woes threaten the plurality of media in Ireland, and it does have a stable that includes talented journalists. So at a certain point, poking fun at a group which has itself luxuriated in the misfortunes of others, just starts being cruel, however satisfying. Thus, the New Year resolution.

But three weeks into the New Year, the resolution is broken. Tom Lyons’ piece this morning, which itself looks like a regurgitation of an analysis in The 2012 Phoenix Annual, and factually describes what is a parlous situation at TCH, was just too much to resist – somehow TCH’s €25m of bank loans looks insignificant when set against the €400m at IN&M.

And then, we had the priceless spectacle of the Sunday Independent today publishing what looks like an ill-disguised copy of an error-ridden story in the British Telegraph newspaper yesterday, replete with the same mistakes! Britain hasn’t bailed out Ireland with a GBP 7bn loan, it’s only GBP 3.226bn and our bank bailout has officially cost €64bn, not €80bn as coincidentally cited in both articles. And you might have expected some balance in the Sunday Independent by pointing out that Ireland had bailed out Irish banks to cover losses, in part, incurred in the UK – remember Updown Court, “Britain’s most expensive house” for which Irish Nationwide lent €75m on a non-recourse basis with the property eventually selling for €35m, that’s just a small example of the losses that you and I are today shouldering in the UK. And of course we have given billions to the banks which have been used to repay unidentified bondholders, but bondholders understood to be mostly French, German and British.

But at least the Independent did report the third quarter results, published this past week, by this State’s biggest agency, and the Agency upon which we’re all still on the hook for €27bn. Because the Daily Business Post didn’t report them. Nor did the Irish Examiner onlin. Nor RTE onlin. Nor The.Paper.Of.Record itself online, the “Irish Times”.

The Irish Times itself is struggling to maintain its paper-of-record position.

Take a look at this article by its commercial property man, Jack Fagan – “Bank of Ireland shareholder Kennedy Wilson has bought State Street’s Irish banking headquarters in the south Dublin docklands for about €108 million.” Now take a look at Kennedy Wilson’s own take on the transaction here – KW “today announced that the company and one of its investment partners acquired a loan with an unpaid principal balance of €120 million. The loan is secured by an office building and adjacent three-acre site in Dublin. ”

Hands up anyone who thinks the Irish Times should know the difference between the sale of property and of a loan?

It was Irish Times columnist David Adams who this week informed us “weeks after the latest census figures confirmed, yet again, that only one-third of Northern Ireland’s Catholics want a united Ireland.” For those of us who watch censuses on both sides of the Border, that statement certainly jangled. Why? Because, the existing Northern Ireland census doesn’t ask the question – “do you want a united Ireland” – if it did, why on earth would Sinn Fein be angling for a referendum? What the current census does capture – for the first time because the question wasn’t asked in previous censuses – is how people in Northern Ireland consider themselves, and overall 25% or 457,482 regard themselves as Irish, 21% as Northern Irish and 40% as British and 14% as something else or nothing at all. How do Northern Irish Catholics see themselves? Well, the Census doesn’t actually say. What the Census does say is that there are 738,033 Catholic-identified citizens in Northern Ireland out of overall total of 1.8m population. So why is The.Paper.Of.Record claiming it already knows how people feel about a united Ireland.

Now, it is all very well to take anonymous pot-shots at the media in Ireland, but in truth there appears to be a real risk that an already emaciated business and economics reporting capability is being whittled down further. In recent weeks, Simon Carswell who knows as much as anyone about the banking collapse has departed to work as the Washington Correspondent for the Irish Times, Laura Noonan has moved to Reuters, her former colleague Emmet Oliver has long since jumped ship to the PR department at the IDA, Niamh Hennessey at the Examiner is in PR at AIB. There is still talent there, and apologies to Tom Lyons at the Sunday Independent for poking fun at his TCH report, because he is one of an increasingly small band of talent reporting on business and economics.

But having said that, recent events show that standards are sliding, and if you are the commercial media, eventually, the poor quality that drives a slide in your audience, and thus circulation and advertising will be self-defeating.

There has been talk for some time, of NAMA assembling a “mid-sized” portfolio of loans for sale in early 2013. On 8th January, 2013, the UK commercial property portal, CoStar reported “IBRC and NAMA are both expected to begin offloading Irish loan portfolios this year, with the latter currently in the process of assembling a €230m-sized portfolio, CoStar News understands.”

And during the week, sources were claiming NAMA was assembling a portfolio of loans relating to David Courtney, of Spain Courtney Doyle fame. The €800m par value portfolio, sources say, include loans relating to the Shelbourne Hotel and the development at Merrion Gates in Sandymount, in fact everywhere David Courtney is connected. NAMA, say the sources, was expected to be looking for about €250m for the portfolio. NAMA’s strategy appears to be to package a mix of good and bad Irish property-related loans, so that the Agency doesn’t continue to report a depressing trend of increasingly-lower performing loans – just 17% in Q3,2012 according to the accounts published this week, by reference to the original par values but including restructuring arrangements.

Insiders say that NAMA’s most senior property man, its Head of Asset Management and Board member, John Mulcahy is unhappy about selling Irish property at present, and would prefer to collect rents where possible, and sit on the assets until there is an improvement in the market. So, selling mixed bags of loans won’t exactly be appealing to John Mulcahy’s sensibilities, say insiders, but it is better than selling the better quality properties and being left with the, err, “crap”.

The David Courtney portfolio is understood to be the first of what are expected to be many of such mixed bags of loans, underpinned by Irish commercial property, offered to the market.

Today, the Sunday Times – article not available online without a subscription – gets some information out there first, with reporter Aine Coffey confirming that NAMA is assembling a €800 portfolio for sale but we don’t hear the David Courtney connection.

We learned during the week in a response to a parliamentary question, that when NAMA is selling loans for less than the par value, it employs a loan broker to ensure the sale price is maximized. It is not clear who the agent will be in this case – Eastdil Secured was in the frame, apparently, but it seems the sale isn’t going to them.

NAMA doesn’t generally comment in individual transactions, but a request was made for comment nonetheless, and if one is forthcoming, it will be posted as an update here.

No, this isn’t déjà vu or a duplicate of yesterday’s blogpost on Pat Shine’s UK bankruptcy. In the Sunday Times today – not available online without subscription – it is again Gavin Daly who reports on the latest NAMA bankruptcy. 56-year old Derek O’Leary who was a close associate of another NAMA bankrupt Reginald Tuthill, was declared bankrupt in London on 7th January 2013. His Irish address is given as Oakmount The Birches Foxrock Dublin 18 Ireland though he is said to be presently trading from 62 Cubitt Building, 10 Gateliff Road London SW1W 8QL.

In July 2012, NAMA had receivers appointed to a slew of companies controlled by Derek. NAMA has also gone to the High Court against these companies and against Reg Tuthill and Derek O’Leary personally, and in its recent quarterly report, NAMA said “the relief sought by NAMA” was judgment against the First, Second and Third Named Defendants in the sum of €90,400,097.64 and Judgment against the Fourth Named Defendant in the sum of €25,170,878.17

The record on here is that 22 NAMA developers have now been declared bankrupt in the UK, but this may be an underestimate. Attempts are underway with the British Insolvency Service to get a comprehensive list of Irish developers who have been declared bankrupt in the UK. For the time being, this is, I believe, the best we have, a record compiled on here.

“We will amend the rules to ensure that no senior public servant (including political appointees) or Minister can work in the private sector in any area involving a potential conflict of interest with their former area of public employment, until at least two years have elapsed after they have left the public service.” Fine Gael/Labour Programme for Government March 2011

““I am delighted to announce this latest transaction which represents another vote of confidence by international investors in Ireland’s recovery and the government’s banking policies in particular. Since making this €1 billion investment in Bank of Ireland in July 2011 the Irish taxpayer has received a generous return of 10% per annum on its money” Minister for Finance Michael Noonan, part of statement on 9th January 2013, after he announced the imminent sale earlier that day

“I welcome Michael Torpey to the Group where I know that his vast experience of the banking sector and his in-depth knowledge of Bank of Ireland will contribute greatly to the implementation of our business strategies and to our dealing with the challenges and opportunities ahead. I would also like to thank Denis Donovan for the role he has played in continuing to manage our Corporate and Treasury Division in conjunction with the other responsibilities he has undertaken in recent years in relation to Group Strategy and our deleveraging and restructuring initiatives” CEO of Bank of Ireland, Richie Boucher, part of statement on 16th January 2013

“I would like to take this opportunity to wish Michael every success in his new role in Bank of Ireland. As the Head of the Shareholder Management Unit in the Department Michael has been fully committed to resolving the banking crisis in Ireland and has contributed greatly to the restructuring of the Irish Banking sector. I have no doubt that Michael will continue to make a valuable contribution to the Irish Banking sector in his new role” Minister for Finance Michael Noonan,part of statement on 16th January 2013

“On the issue of the official to which Deputy Pearse Doherty referred [Michael Torpey], he went on holidays to Australia on 14 December and did not return until last week. In accordance with normal practice, he will not take up duty in the banks for another two months. There is a kind of cordon sanitaire for three months so there is no conflict of interest in the way this was operated. It is a general policy to reduce the borrowed moneys put into the banks by the taxpayer” Minister for Finance Michael Noonanin the Dail 17th January 2013

Last week, the Opposition politicians scratched the surface of the €1bn transaction that was announced and completed in less than 8 hours on 9th January 2013, when they were all still technically on holidays. On Wednesday, it was announced that the head of the Shareholder Management Unit in the Department of Finance, Michael Torpey, was being poached by Bank of Ireland to a plum new role as chief executive of a Bank of Ireland operating unit. No details were disclosed on salaries but we do know that Richie Boucher earns €640,000 per annum. We also know that Minister for Finance Michael Noonan allows bank staff to be recruited for more than €500,000 per annum – for example, the chief risk officer at IBRC was recruited last summer at an unspecified €500,000-plus salary.

The Shareholder Management Unit in the Department of Finance is responsible for managing our shares and stakes in the covered banks. And so far, we have shoveled €4.7bn into Bank of Ireland, though we have received some of that back in the form of bank guarantee fees, dividends and interest on securities. One security we held in Bank of Ireland was the so-called Contingent Capital Note or “CCN” or “CoCo” – this was a €1bn loan to Bank of Ireland until 2016 which paid us 10% per annum. If Bank of Ireland made further losses and its capital base was decimated then the CCNs would be converted to ordinary shares. So it’s a simple loan paying 10% per annum repayable in 2016 but also it’s convertible into ordinary shares if things deteriorate at Bank of Ireland.

Bank of Ireland wanted the Government to sell its CCNs. We know this because Bank of Ireland is picking up the lionshare of the costs incurred in the recent disposal of the €1bn CCNs – why else would it agree to pick up these costs, unless it did in fact want the Government to sell the CCNs.

The Government sold the CCNs on 9th January 2013, announcing a so-called “open book” that morning, and announcing the conclusion of the sale in the afternoon. After the sale, the CCNs traded on a secondary market at a profit to the €1.01bn sale price achieved by the Government. Whilst there is no clear evidence of fault in the way in the CCNs were offered, the quick sale and the profit on the secondary market afterwards beg questions as to whether the CCNs were adequately marketed to ensure potential buyers had access to information, and could put funds in place to settle the transaction on 16th January.

And then on 16th January, the head of the unit responsible for the CCNs bales, and joins Bank of Ireland, or at least he will be joining “before the end of the first quarter of 2013”

Minister Noonan welcomes the appointment of Michael Torpey to Bank of Ireland. The Minister was questioned in the Dail this week by the Sinn Fein finance spokesperson, and perhaps surprisingly, the Minister was familiar with Michael Torpey’s holidays. There was the implication that being the other side of the world, that Michael Torpey was cut off from what was happening with the Bank of Ireland CCNs. We don’t need Mick Dundee to demonstrate the absurdness of that implication!

No-one is casting aspersions on Michael Torpey or suggesting any malfeasance whatsoever on his part, but does anyone else see the perceived and the potential conflict of interest in the above?